A Test of the Law of Demand in a Virtual World

Abstract

We report results of an experiment on prices and demand in a fantasy-based virtual world. A virtual world is a persistent, synthetic, online environment that can be accessed by many users at the same time. Because most virtual worlds are built around a fantasy theme, complete with magic, monsters, and treasure, there is considerable skepticism that human behavior in such environments is in any way “normal.” Our world, “Arden,” was designed to test whether players in a typical fantasy environment were economically “normal.” Specifically, we tested whether fantasy gamers conform to the law of demand, which states that increasing the price of a good, all else equal, will reduce the quantity demanded. We created two exactly equivalent worlds, and randomly assigned players to one or the other. The only difference in the two worlds was that the price of a single good, a health potion, was twice as high in the experimental world than in the control. We allowed players (N = 43) to enter and play the environment for a month.

The Mapping Principle, and a Research Framework for Virtual Worlds

“…In her work on science learning among adolescents in a virtual world, Kafai has studied interactions and learning, with the occasional ability to have the world altered to test a principle (Kafai, 2008; Neulight, Kafai, Kao, Foley, & Galas, 2007). In one recent case, Castronova and colleagues implemented a treatment and control condition version of a single‐player game to test economic behavior (Castronova et al, 2008). These initial outcomes beg an obvious question: Are these behaviors “real?” And by real, we mean: Are these behaviors similar to what we would observe had they occurred in the flesh and blood offline world?…”

Evolution and Transformation of the Central Place Theory in E-Business: China’s C2C Online Game Marketing

“…Hamari and Keronen [11] used the random effects model to study a platform and found that enjoyment and prolonged use of the platform were more important predictors for purchases in virtual worlds than in games. Castronova et al [12] found that fantasy gamers may well be economically normal. They studied the consumption behavior of game players from the field of economics.…”

An Experimental Pricing Framework for E-Commerce

“…However, the discussion can be generalized to firms selling goods and services online and those that monetize other scalable digital products and services such as video streaming, social media platforms, online learning delivery systems, and business analytics software. To date, with the exception of Castronova et al [7], who experimentally estimated the demand elasticity of digital items in an online game and reported that the price elasticity of the demand was −0.431, research in this field remains scarce.…”